Single mothers and their children: Evaluating a work-encouraging welfare reform

Using rich administrative data from Norway, we evaluate a 1998 work-encouraging reform targeted at single parents. We especially focus on educational performance for the children of the involved single mothers. For these children, average school grades at age 16 dropped significantly by 0.7% of a standard deviation per additional year that their mothers were exposed to the reform. Furthermore, we find that the reform affected single mothers by increasing their working hours (and thereby reducing their time at home). We find no average effect on disposable income (mothers traded off reductions in benefits with increases in earnings). Thus, reduced parental time at home seems to be the main mechanism for the observed moderate drop in children’s grades. In line with this, we find that the reform increased the use of formal after-school care, and we find a larger reform effect for children of mothers with no informal network to help with child care.